MUMBAI/BENGALURU: It has not been a good first-quarter for Indian IT companies and the year may just get worse. After the three largest IT companies posted the most disappointing first-quarter growth figures in a decade, analysts are asking whether the industry growth target, issued in February, still makes sense. In July, Britain voted to leave the European Union and the impact of the vote was not factored in when the National Association of Software and Services (Nasscom) was determining the FY17 growth target, industry sources said.

Nasscom had said it expects the industry to grow 10-12% in constant currency terms. “Growth was lower than expected for them in what is a seasonally strong quarter and this is before Brexit has even hit. This means the outlook for FY17 has to be relooked at. I don’t think any of these companies (TCS, Infosys, Wipro) are likely to cross 10% in growth in this fiscal,” Sagar Rastogi, analyst with Ambit Capital said.

Mindtree, one of the first midsized IT companies to report earnings, also posted a dismal set of results, implying that the bad quarter was an industrywide phenomenon. Ambit’s Rastogi said a revision of the Nasscom guidance would make sense under these circumstances. He said it was possible that the guidance would be cut to 8-10% after November. Nasscom’s senior-vice president Sangeeta Gupta told ET that while Nasscom hadn’t factored the impact of Brexit, it was confident about the guidance. “From our conversations with companies now they seem confident that this (guidance) could be met,” said Gupta.

“But of course if something drastic happens in Brexit then this could change,” she added. Infosys has already lowered its full year revenue forecast to 10.5-12% in constant currency terms, lower than previously estimated 11.5-13.5%. “Infosys will need a couple of stellar quarters if they are to even meet the lower end of their guidance — at this point even 10.5% seems overly ambitious,” said the head of research at a domestic brokerage.

Wipro, meanwhile, has said Brexit would impact discretionary spending in the near term, even as it guided for 0-1% growth in the second quarter, an all-time low. TCS has said it would have to ‘wait and watch’ and that it was too early to say how the exit would work. Also, playing out is the predicted divergence in their results.

Analysts have often said that as renewed contracts begin to require a digital component and as traditional business is commoditised, Indian IT company results will begin to materially differ from each other.TCS’ results were buoyed by its European operations, while Infosys’ were dragged down by the continent. Even service lines like consulting and enterprise solutions showed opposite results. The Indian business, which has always been volatile, also showed a stark difference. TCS’ India revenue rose 8.5% sequentially, while it fell 7.6% at Infosys.

Wipro, meanwhile, said it is restructuring the business. “My hunch is that we are going to have to get used to inconsistency in revenue patterns for Indian IT players,” Tom Reuner, vice president at IT consultancy HfS, told ET. He said that while TCS used to be consistent performer, the company has reached a certain plateau that makes consistent growth harder to come by, while Infosys and Wipro were still working on company-specific issues. In the market share battle, while TCS did not enjoy a blowout quarter, the Mumbai-based market leader still maintained its lead in terms of incremental revenue generated. Over the past year, TCS still remains comfortably ahead of the pack that includes Infosys and Wipro.

Experts pointed out that top companies in India’s $160-billion IT industry are finding it hard to offset the declines in revenue from traditional commoditized IT services.

“Pricing pressures in large Infrastructure management-oriented, rebid deals have intensified as per our checks with deal consultants (such as ISG),” said Viju George and Anshul Agrawal of JP Morgan India, in a research note to clients last week.